Environmental Tax, Urban Minimal Wage and Welfare

Cheng-Te Lee, Kuo-Hsing Kuo, Chen Fang

Abstract

This paper constructs a specific-factor model of a closed HT economy to examine the reasons for the government of China imposing on environmental tax and increasing the minimum wage simultaneously. We find that the government policies will decrease the pollution and increase the urban unemployment rate. In addition, we also prove that the impact on the welfare level will depend on the degree of disutility of pollution. If the degree of disutility of pollution is large enough, then the policies of China government will raise the welfare level.

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